Crude oil price reaches a 12 year low

Analysts like Barclays, Macquarie, Bank of America-Merrill Lynch, Societe Generale and Standard Chartered Bank (SCB) all cut their oil price forecasts for this year earlier this week, with the latter saying that prices could fall to as low as $10 a barrel.

Production of domestic cheap-to-produce shale oil has soared, but overseas producers including Saudi Arabia have balked at cutting their own production for fear of losing market share, experts said.

The floor and ceiling aim to buffer the negative effects of violent fluctuations in worldwide oil prices, according to the National Development and Reform Commission (NDRC).

Even so, with waning economic growth, growth in demand for gasoline was moderate last autumn and appetite for diesel has fallen, putting oil demand ― refinery throughput plus net imports of fuels ― down 2.5 per cent in November.

Demand for refined products, especially gasoline, rose sharply in 2015 as consumers took advantage of low prices, and some investors point to robust consumption as a key reason that they expect oil prices to start rising later this year. USA crude oil production levels continue to hold, though market pressures may push output there lower.

Oil prices are off about 70 percent from mid-2014 and down close to 10 percent for the year. Morgan Stanley reiterated its concerns in a recent note forecasting oil prices could fall into the $20s with the strength in the US dollar against major currencies.

On Tuesday, the US Government forecast that oversupply globally will swell until 2017.

The overall tenor of the market remained bearish, analysts said.

West Texas Intermediate crude for February delivery rose 4 cents to settle at $US30.48 a barrel on the New York Mercantile Exchange.

Brent crude, the global benchmark, was up 28 cents at $31.14 a barrel.

“I think today’s inventory report is all about products”.

Bernard Aw, a market strategist with IG Markets Singapore said, that if the market continues to test the United States dollars 30 price level, “it is possible that the mark might eventually break”.

Meanwhile, Organisation of the Petroleum Exporting Countries president Emmanuel Ibe Kachikwu said at an energy forum in Abu Dhabi he expected an extraordinary meeting of the oil cartel in early March to address nosediving crude prices.

China has exploited a plunge in crude prices by easing rules to allow private refiners, known as teapots, to import crude and by boosting shipments to fill emergency stockpiles.

“We see a bounce off here… but a change in trend is not visible yet”, he said.